News & Features

Slowing Demand for Expat Homes Makes Jakarta Landlords More Flexible

Colliers report shows reduced demand for housing from expatriate markets in the first half of 2015

By Muhamad Al Azhari/Jakarta GlobeThursday, August 27, 2015

Slow demand for housing from expatriate markets is making landlords in Indonesia more accommodating to their customers, including by offering lower rents and providing additional amenities like home furnishing, a report from property market research group Colliers International said.

Colliers International Indonesia’s Research & Forecast Report for the second quarter of 2015, seen by the Jakarta Globe, shows that South Jakarta continues to attract most of the expatriates looking for homes in the capital, as this area provides a wide range of premium facilities like international schools, international clubs, international hospitals, high-end food and beverage establishments, shopping malls, and other places of interest for expatriates.

However, due to the current economic conditions, slow growth, falling commodity prices, and a tougher immigration stance against foreigners working in Indonesia, there has been a reduced demand for housing from expatriate markets in the first half of 2015, Colliers said.

“Due to a [reduced number] of inquiries for expatriate housing, landlords are now becoming more flexible by giving discounts in rent ranging from 10-20 percent per month, by improving payment terms and by becoming more cooperative in providing additional related requests like home furnishing, etcetera,” Ferry Salanto, associate director of research at Colliers International, said in the report.

Homes with three to five bedrooms at 250 to 1,500 square meters are offered at prices ranging from $3,500 to $12,000 per month.

Interestingly, the report noted that not many landlords are aware of -- or are willing to implement -- the new Bank Indonesia regulations requiring all quoted and contracted rents to be in rupiah, instead of in US dollars.

The central bank has banned the use of foreign currencies for domestic transactions under a regulation that has been effective as of July 1. The aim is to control onshore demand for dollars as well as ease downward pressure on the rupiah. The requirements affect both cash and non-cash transactions and there is a penalty for non-compliance.

Colliers said landlords are now willing to consider discounts ranging from $300 to $500 per unit per month for a standard expatriate house in the current market and throw in additional services such as laundry, breakfast or use of facilities.

The Colliers report also noted that the falling oil prices have caused major multinational oil and gas companies operating in Indonesia to cut back on investment this year. As a result, the companies may decide to "repatriate more senior management with families and instead replacing them with younger, single executives to reduce costs."

"In some cases, due to tightening budgets, companies have offered employees the option of either returning to their home country with their family or staying in Indonesia but sending their wife and children home," Colliers said.

Another important issue in the expatriate housing market is the tougher immigration stance, especially in relation to work permits.

"The online process requirements, although originally designed to streamline the process, have, in fact, slowed the system, much to the frustration of many applicants," the report said.

"Facilitators are warning applicants to ensure that they have the complete detailed documents, otherwise they cannot process the permit," it said, adding that immigration officials in Indonesia "are seemingly much stricter" although the current regulation was implemented in 2013.

"Immigration officers are becoming more cautious because of the transparency now required in many government offices. In general, for a higher-level position, the process of issuing a working permit will be processed quickly without intensive inquiries, however, most middle management level applications will be severely scrutinized and a delay in processing is expected," the Colliers report said.

"The good news for expatriates is that now foreigners do not have to speak Indonesian to obtain a work permit. It was confirmed that the plan for language tests would be withdrawn after several complaints," the report said.

President Joko Widodo last week asked the manpower minister to drop the language test requirement, but the Energy and Mineral Resources Ministry says it plans to uphold the language requirement in the oil and gas sector.

This article first appeared on the Jakarta Globe website on August 26, 2015.

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